Examination of the AKOBEN Environmental Performance Rating Tool: Implications for Environmental Disclosures

ABSTRACT The purpose of the study is to assess the level of corporate environmental disclosures in the corporate annual reports of mining and manufacturing companies in Ghana and their environmental performance based on the industry. It further assesses the effect of environmental performance on environmental disclosures. Finally, the study evaluates the AKOBEN environmental performance rating tool as an evaluation tool. A content analysis of the corporate annual reports of 25 companies over a four-year period for their environmental disclosures was undertaken using a disclosure index developed in line with Wiseman’s (1982) environmental disclosure index. The environmental performance of the sampled firms was proxied by the rating score based on the AKOBEN environmental performance rating tool. A multiple regression analysis was undertaken using a random effect estimation model to test for the effects of environmental performance on environmental disclosures. The rating tool was evaluated by benchmarking it against the KLD Global Sustainability Index (GSI), China’s GreenWatch, and Indonesia’s PROPER. The study finds the rating tool to have the key elements that make it comprehensive, only in evaluating the rating criteria it is set out to assess. Mining companies make more environmental disclosures than the manufacturing companies. Similarly, on the average, mining companies performed better than manufacturing companies. Environmental performance was found to be a statistically significant, but negative, determinant of environmental disclosures. This indicates that mining and manufacturing companies make environmental disclosures to legitimize their activities in the society. The Environmental Protection Agency must consider expanding the rating tool to cover companies operating in other industries. Management of companies also needs to improve upon their environmental disclosure practices to gain legitimacy in the society. However, the study evaluates the rating tool without recourse to the perceptions of stakeholders about the appropriateness of the tool.